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I need some help here. I am intending to apply for ILR based on 10year long residence. I came to UK in January 2003 on student visa. I had been extending my student visas until 2010 for 8 years continous leave. I got married in 2010 and switched to non eea residence card for 5 years. I had been on non eea residence card for last 2 years. I will complete 10 years continous residence in Uk in December 2012. I understand UKBA excersizes discretion and count time spent as non eea dependant to complete 10 years long residence. Is that correct?
Also in may 2008 I applied for my leave to remain extension in time, however home office sent me a letter with my application back saying my payment had been declined. This happened as the credit card authorisation failed, but when I received the application back, my leave was expired by 3 days. On their letter it said submit a fresh application, which I did rightaway. The entire duration from them sending my application back to me resubmitting my application was 8 days. I understand the home office again excersizes discretion for a one off 10 days. As it was not my fault, credit card auth failure, and my initial application was before my leave expired. Please can someone advise me, I am very worried.

ILR is based on 10 years lawful residence in uk regardless of the type of visa. Yes you can surely apply for ILR if you can prove that during the period of your EEA family permit your EEA partner is continuosly excercising EU treaty rights by being worker, self sufficient, self employed etc.
Moreover, during 10 years if an application has been delayed to submitt for less than 10 days in one time during 10 years then according to manual the caseworker is required to use discretion and award you ILR.
Hope it will be make you further clear.

Thanks Englandd, that's very helpful.
I am a bit relieved now, as I was getting mixed comments. Can also someone else please advise or confirm my queries. I owe a lot to the forum, for guiding me always.

After 3 three years you will also get the EEA equivalent to ILR which is called PR. That is free and happens automatically after 5 years residence as the family member of an EU citizen.

Thanks for ur valuable comments. The issue is that my wife is intending to go back to her country and take my 2 year old son with her, I am afraid the relationship is coming to an end, and I am worried abt my legal
Status when that happens. I don't see this relationship lasting another 3-4 months max, hence exhausting the possibility of 10year legal residence ILR. Please advise

If your wife would leave the UK before you complete the 10 years, it might be difficult for you to prove she has been exercising treaty rights (unless she already has a PR status). This is required in order to include the time under EEA regulations. Just having a RC is not enough.

hello everyone any updates or success stories , I face same situation and would really appreciate some help. thanks